Student Loan Forgiveness

Brandon Dunigan

President Joe Biden announced on Aug. 24 that most federal student loan borrowers will be eligible for some forgiveness.  The forgiveness would be up to $10,000 if you didn’t receive a Pell Grant, and up to $20,000 if you did. The Whitehouse fact sheet states if all eligible taxpayers applies,  the forgiveness will provide relief to up to 43 million borrowers, including cancelling the full remaining balance for roughly 20 million borrowers. The US Department of Education continues to provide updated guidance

When can I apply for student loan forgiveness?

Early October – A simple application is supposed to available by early October.

When should I submit my application?

The US department of education expects it to take 4-6 weeks to process the applications and verify approval. Based on that initial estimate, Federal student loan borrowers should apply for forgiveness no later than November 15th if they want to have it approved before the student loan payment pause expires on December 31.  There have been seven extensions of the pause, but this will likely be the final one. As of right now,  December 31, 2023 would be the final date to apply for forgiveness.

What should I do now before the application is available?

  • Review your adjusted gross income from your 2021 and 2020 tax return to see if you qualify.  To qualify,  borrowers must have an adjusted gross income of less than $125,000 (single) or $250,000 (Married Filing Joint) in either year.
  • Review your student loan records at, the Department of Education’s federal student aid portal.
    • Your online student Aid account will display Pell Grant information
    • It will show all loans from all providers, the types of loans, and the rates
    • Determine if you need to consolidate any loans but be wary of the downsides of consolidation
    • Sign up for updates at via text or email
  • See if you are are eligible for any other debt forgiveness or debt discharge programs on the website.

What happens once it is forgiven?

A provision from the American Rescue Plan of 2021 makes student loan forgiveness federally tax-free through 2025, but Minnesota and a few other states will tax the student loan forgiveness.  Depending on your Minnesota tax bracket, that could be 5.35% to 9.85% of the forgiven loan balance, so set some money aside to take care the extra tax amount that will be due.  Presumably, the amount forgiven will be taxable in the year that it is granted. We will continue to see additional guidance from states as they evaluate state laws related to the forgiveness announcement.

October 31, 2022: Expiration of Limited PSLF Waiver

The Biden administration announced an initiative that relaxes the Limited PSLF (Public Service Loan Forgiveness) rules.  PSLF is a student loan forgiveness program for borrowers who devote their careers to nonprofit or government work. Borrowers can become eligible for federal student loan forgiveness after making 120 “qualifying payments,” which is equivalent to 10 years if the payments are made consecutively (although they don’t have to be).  If you thought you didn’t qualify,  it is worth a second look and you should do it soon.  This is potentially a multistep process.  You may have to consolidate FFEL-program loans, submit employment certification forms (requires action from your employer), or adjust your loans to a income driven repayment plan.  Go to StudentAid.Gov/PSLF to sign up today and start the process.


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